Spotify in Dispute Over Royalty Payments

On Monday, fans of the punk and metal bands on Victory Records, an independent label in Chicago, could go to Spotify to stream thousands of songs by artists like A Day to Remember, ForeverAtLast and Emmure. By late that night, however, most of the songs had disappeared from the service.

What happened in between points to one of the more intractable problems in the digital music business. Spotify, Victory and the label’s royalty collection agent have sparred over how songwriting royalties are tracked and paid.

Victory hired Audiam, a technology company that specializes in tracking down unpaid royalties online, to study the royalty reports that Spotify sent for the label and its associated publishing company, Another Victory, which handles songwriting rights. Audiam found that for as many as 53 million streams of songs represented by Victory, Spotify had paid the label to use its recordings, but had not paid royalties for the songwriting portion to Another Victory.

“We used their data and it did not match up,” Tony Brummel, Victory’s founder, said in an interview. “It was 30 percent off, meaning we were 30 percent underpaid.”

What came next is unclear. Mr. Brummel said Spotify gave no notice that it was going to remove Victory’s songs. But Jonathan Prince, a Spotify spokesman, said the service removed the songs after hearing from the label.

“We got an email from them that we construed to be a takedown notice, and felt that we had to take the content down,” Mr. Prince said.

Mr. Brummel disputes that. “We made no indications of any legal and/or litigation threat at any time,” he wrote in an email, “and have never contemplated such.”

In a statement to The Wall Street Journal, Spotify also said Another Victory and Audiam had not supplied sufficient data to support their claims. But Mr. Brummel and Jeff Price, the chief executive of Audiam, dispute that as well, saying that they have given Spotify detailed information going back to January 2012.

The scuffle between Victory and Spotify may only be over what amounts to tens of thousands of dollars in songwriting payments. But it suggests a wider issue in the music industry over royalties and the huge amounts of data now required to process them.

Both streaming services and music publishers say that the data matching a recording with the publishing rights for its underlying composition is often garbled or mismatched. A sector of the industry has developed to address these problems, including Audiam and Kobalt, a large publisher that has established its own collection agency.

But the problem remains widespread. The National Music Publishers’ Association, a trade group that represents thousands of publishers, is negotiating a settlement with streaming services to cover past nonpayment.

“We estimate that 25 percent or more of the activity on interactive streaming services is not being matched properly,” said David Israelite, the chief executive of the trade group. “It’s an area of the music industry that is very much broken, but we are in discussions with the digital music company about how to best address this problem.”

Victory’s songs are still not on Spotify, which says it has 75 million users around the world, 20 million of whom pay for monthly subscriptions.

“We only want to be a great partner,” Mr. Brummel said, “that gets paid according to copyright law.”

A version of this article appears in print on , on Page B2 of the New York edition with the headline: Spotify in a Dispute Over Royalty Payments With an Independent Music Label. Order Reprints | Today’s Paper | Subscribe